Disadvantages of Money Orders
Are You Still Accepting Money Orders?
Despite a majority of America’s population moving quickly towards a cashless payments system, a large percentage of people still rely on cash-based products to carry out their everyday financial transactions. In fact, more than 1 billion money orders are sold each year, and more than 25 percent of the U.S. population has reported purchasing at least one money order in the last 12 months.
For businesses dealing with unbanked customers, however, there can be more convenient and cost-effective options in this increasingly paperless world.
Why Businesses Use Money Orders
Money orders provide businesses a certain amount of protection when receiving payments from customers. That’s because unlike a regular check, the money has already cleared in this type of financial transaction. If your business involves lending, debt collections, or another service that’s geared towards the underbanked population, money orders are likely a part of your payment structure. Your customers can use cash for their payments, which is helpful if they don’t have an existing bank account or even a prepaid debit card.
However, money orders can cost your customers plenty of time and money, which could potentially delay when you actually receive payment. Additionally, money orders come with amount limits, usually ranging between $700 and $1,000. If your business regularly charges higher amounts than that in a single billing cycle, money orders could limit your customers’ ability to pay.
Do Money Orders Lower Your Operational Efficiency?
Money orders may seem like a more reliable option compared to cash or checks, but they also add a huge administrative burden to companies. Once a money order is accepted, it must be endorsed and deposited at a financial institution just like a regular check. Plus, you may need to verify the authenticity of a money order. So while they may seem like a low-risk payment option, this isn’t necessarily the case. Accepting them can involve calling the issuer for verification and analyzing the money order to identify its security features.
The entire process is labor intensive for your staff and can ultimately result in receiving fraudulent money orders. Additionally, money order drop boxes can be prime targets for physical theft.
Bottom line? Money orders actually carry a large degree of risk while simultaneously causing extra administrative work for your employees.
Using PayNearMe as an Alternative to Money Orders
PayNearMe is a convenient platform that connects cash-paying customers to an easier way to pay their bills. When people owe money to a participating business, the customer simply goes to one of PayNearMe’s 27,000 locations, including popular chains like CVS and 7-11.
Many of these retailers are open 24/7, widening the timeframe wherein unbanked customers can conduct their business. It takes less than 60 seconds to complete a transaction through PayNearMe, and your business is automatically notified of the payment. Receipts are given to the customer through the PayNearMe retailer.
In short, innovative platforms like PayNearMe are providing both businesses and customers exactly what they need. Unbanked users can still make cash payments in a safe and secure setting, while businesses receive funds electronically in a way that’s virtually hassle-free.